FTSE in-depth: Noventa to dig deep for cash

By Geoff Foster for MailOnline
Updated: 03:12 EDT, 3 June 2011

Few would argue that AIM has been one of the City's major success stories since its inception 16 years ago, but it has never been a place for the faint-hearted.

Foster: The FTSE followed the US lower.

There have been a few disasters along the way and yesterday Noventa was added to that category.

Having traded close to £3 earlier in the year, shares of the Jersey-based miner of rare metal tantalum, used in mobile phones and DVD players, crashed to 45p before closing at 67p, down 105.38p or 61.49%.

Investors sprinted for the exit after the company warned the market it had missed its production targets and will need a significant cash injection for a new plant at its Marropino mine in Mozambique.

Noventa has apparently already spent around £33m and now has £9m in cash, which is substantially less than the amount required to erect a plant. A deeply discounted fundraising is now urgently required.

Roddie Fleming, one of the most high profile members of the billionaire banking dynasty, owns over a third of Noventa's equity and should back any fundraising, as will other major shareholders including Highland African Ventures (15%) and Capital Ventures (7.7%).

The trouble is Noventa has blotted its copy book in a big way and Joe Public will now probably give it the barge-pole treatment.

Many would have piled in after last September's upbeat statement that the company was in a strong position to expand operations on a profitable and substantial basis. Nine months later and it's a matter of mind the doors, going down.

Gulfsands Petroleum was another junior market casualty, closing 30.25p down at 234.75p.

Investors exited stage right after the Gulf of Mexico explorer said that its Abu Ghazal-1 exploration well, which was deemed a 50m-barrel prospect and could be worth 100p a share, has encountered only sub-commercial quantities of heavy oil. The 52-week high was 411p.

Overnight weakness in the US and Far East after credit rating agency Moody's downgraded Greece's debt deeper into junk territory and warned the chances of a default must be 50/50, made for a dull start in London and the that's how it stayed for the rest of the day.

The Footsie closed 80.69 points down at 5,847.92 after Wall Street followed Wednesday's fall of 279 points with a further decline of 80 points in early trading.

Late in the day dealers heard that Goldman Sachs had revised down its estimates for today's crucial May non-farm payroll (employment) from 180,000 to 145,000 following news yesterday that US jobless claims fell less than expected in May.

Bulls were last night praying for a bullish figure to stop the rot.

Support services group Serco climbed 25p to 597.5p on a Credit Suisse upgrade. Capita, which recently announced the £24m purchase of healthcare recruitment firm Team24, added 13.5p to 737.5p.

Vague rumours of a bid from Telefonica O2 helped Cable & Wireless Worldwide buzz 1.2p higher to 51.55p on hefty turnover of almost 22m. C&W Worldwide was demerged from Cable & Wireless in March 2010.

Cambridge-based bluetooth specialist CSR cheapened 13.7p to 337p after Numis downgraded to add from buy in the wake of mobile phone giant Nokia's profit warning. Nokia is one of CSR's biggest customers.

Meanwhile, rumours persist that CSR will soon walk away from its deeply unpopular £418m all-share bid for loss-making Silicon Valley company Zoran after it recently reported a disappointing set of first-quarter figures and warned about the second quarter.

Should CSR say cheerio to Zoran, analysts reckon it will itself become a takeover target. Renewed speculative buying amid continuing talk of an imminent disposal lifted software group Misys 3.9p to 371.9p.

Despite a Morgan Stanley upgrade to overweight and target price of 1150p, online sports betting group Betfair shed 11p to 824p. The broker says the bad news since October's flotation (at £13) is now well understood, and it sees scope for outperformance from here due to a low valuation and a re-acceleration in growth as new products come online.

Park Group, the voucher and pre-paid gift card provider, closed flat at 46p despite news that its Flexecash platform has been selected as the only multi-choice reward mechanic for the Daily Mail's Weekend Mail Rewards Club.

AZ Electronic Materials firmed 4p to 316p after Goldman Sachs advised clients to buy in the wake of a 21% share placing at 302p a share by private equity holders.

Following the IPO in October last year Vestar and Carlyle each retained a 21.54% stake in AZ, with management keeping 8%. Yesterday's placing represented 50% of the outstanding private equity shareholding.